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Interest Rate Swap Spreads (interest + rate_swap_spread)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Australian and US interest rate swap markets: comparison and linkages

ACCOUNTING & FINANCE, Issue 1 2004
Francis In
Abstract We investigate and compare the determinants of US and Australian interest rate swap spreads and the linkages between these markets. The slope of the risk-free term structure is the most significant determinant and its importance is greater for longer terms to maturity. Interest rate levels and, in Australia, the default premium also have some impact. The influences of interest rate volatility, the liquidity premium and (in the USA) the default premium are small or negligible. We hypothesise, and our evidence confirms, that the US swap market significantly affects the Australian swap market but not vice-versa. [source]

Forecasting interest rate swap spreads using domestic and international risk factors: evidence from linear and non-linear models

JOURNAL OF FORECASTING, Issue 8 2007
Ilias Lekkos
Abstract This paper explores the ability of factor models to predict the dynamics of US and UK interest rate swap spreads within a linear and a non-linear framework. We reject linearity for the US and UK swap spreads in favour of a regime-switching smooth transition vector autoregressive (STVAR) model, where the switching between regimes is controlled by the slope of the US term structure of interest rates. We compare the ability of the STVAR model to predict swap spreads with that of a non-linear nearest-neighbours model as well as that of linear AR and VAR models. We find some evidence that the non-linear models predict better than the linear ones. At short horizons, the nearest-neighbours (NN) model predicts better than the STVAR model US swap spreads in periods of increasing risk conditions and UK swap spreads in periods of decreasing risk conditions. At long horizons, the STVAR model increases its forecasting ability over the linear models, whereas the NN model does not outperform the rest of the models.,,Copyright © 2007 John Wiley & Sons, Ltd. [source]

Determinants of Japanese Yen interest rate swap spreads: Evidence from a smooth transition vector autoregressive model

THE JOURNAL OF FUTURES MARKETS, Issue 1 2008
Ying Huang
This study investigates the determinants of variations in the yield spreads between Japanese yen interest rate swaps and Japan government bonds for a period from 1997 to 2005. A smooth transition vector autoregressive (STVAR) model and generalized impulse response functions are used to analyze the impact of various economic shocks on swap spreads. The volatility based on a GARCH (generalized autoregressive conditional heteroskedasticity) model of the government bond rate is identified as the transition variable that controls the smooth transition from a high volatility regime to a low volatility regime. The break point of the regime shift occurs around the end of the Japanese banking crisis. The impact of economic shocks on swap spreads varies across the maturity of swap spreads as well as regimes. Overall, swap spreads are more responsive to the economic shocks in the high volatility regime. Moreover, a volatility shock has profound effects on shorter maturity spreads, whereas the term structure shock plays an important role in impacting longer maturity spreads. Results of this study also show noticeable differences between the nonlinear and linear impulse response functions. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:82,107, 2008 [source]